Stavros Thomadakis became chair of the International Ethics Standards Board for Accountants in January, leading a board under the auspices of the International Federation of Accountants that oversees a global ethics code for the accounting profession.
Dr. Thomadakis is emeritus professor of financial economics at the University of Athens. He was the first chair of the Public Interest Oversight Board from 2005-2011, which oversees the activities of the IESBA and other standard setters. In this interview, conducted by IFAC assistant manager Alexandra Waibel, he talks about his goals and background.
How will your previous work as Public Interest Oversight Board (PIOB) chair and your background in academia influence how you approach your role as IESBA chair?
As a long-time academic, I've learned to be patient and to synthesize many different points of view using a constructive approach. I think that has become part of what I would call my style of operating, not only as an academic, but also as a regulator, as PIOB chair, and now IESBA chair.
Of course, as a former chair of the PIOB, I am familiar with the Ethics Board. I have been committed to the public interest for many years and in various capacities during my career, and I bring this strong commitment to the IESBA. I can already see that the members of the IESBA share a similar commitment, so I look forward to working with them to continue to strengthen the relevance of the board’s work to the public interest.
Many parties associated with the capital markets have been criticized as a result of the global financial crisis. How has the IESBA been affected by the crisis?
I think the accounting profession is still facing residual distrust and reputational damage that was directed at many professionals associated with the capital markets as a result of the global financial crisis, including auditors and accountants in both practice and business.
Ethics has become a central issue in the post-crisis world. Expectations for ethical behavior and for the ethics standard setter have been raised. That is why the regulatory community and the wider public are more closely following our work. And that is why our attention must be directed to expectations and to the risk that a prominent ethical failure in the world of auditing may adversely affect our reputation.
As standards and standard setting are instruments of the profession’s self-commitment, they can be used to rebuild confidence in the profession in all quarters—with users, regulators and the general public. The oversight arrangements that are in place for standard setting will also contribute to this outcome.
What are some of your goals as you begin your tenure as chair of the board?
My primary goal as chair is simple and practical: to lead the IESBA to produce results from our various projects that will raise the quality of the Code [Code of Ethics for Professional Accountants] and enhance the reputation of the IESBA as an independent international standard setter.
The implementation of the Code by many jurisdictions and the ability of the Code to inspire accountants and auditors, regulators and policy-makers around the world in their work, will be sure signs of our leadership in ethical thinking and practice. My predecessor, Jörgen Holmquist, had a very keen sense of this and it informed his pursuit of an active outreach and communication agenda. I plan to continue in his steps and consolidate our standing among important stakeholders.
Our strong public interest commitment must remain constantly visible and relevant. Among the various standard-setting activities that surround the accounting profession, ethics is the one most focused on mindsets, culture and behavior. As we seek to influence and reshape the mindsets of others by offering high-quality standards and an overall ethical framework, we must also constantly improve and raise our own. No matter if we are practitioners or non-practitioners, professionals or academics, our mindset in this board must remain fully compatible with our public interest mission.
What would you say in response to the implied criticism of those who have asked if the IESBA Code represents the “lowest common denominator”?
The answer is, and should be, a resounding: “No, it does not.” Given our international aspiration, we must produce a Code that is global in its perspective and has global applicability. If the standards that we propose inconvenience existing practices in certain parts or certain activities of the profession, this is no reason for stepping back. It is reason for ensuring that they are efficient, functional and effective in achieving an ethical outcome.
This can only be achieved by remaining principles based. There are notable areas, auditor independence being the foremost example, where regulations in important jurisdictions have forged ahead of the Code and specified explicit rules that are more stringent than our standards. This is not a failure of the Code, as some say, since specific needs will always arise in one or the other jurisdiction that will necessitate specific requirements or prohibitions.
Needless to say, there are some cases where major jurisdictions may follow dissimilar or even opposing solutions to ethical issues. In those cases, the Code must seek adjustments that will embody principled synthesis. In such areas, especially, the assistance and guidance of our oversight body, the Public Interest Oversight Board, will be sought and valued.
How can the IESBA Code remain relevant in a rapidly changing world?
In a dynamic and changing world, we must also be dynamic and forward looking. Every project that we undertake, every standard that we produce, and every pronouncement that we make, must be put to the test. Are we responding effectively to new challenges? This is our challenge because what needs to be done is not always what is convenient or comfortable, for us or our stakeholders.
To achieve its goal, standard setting has to be sensitive to changes in the environment, and that is something that the IESBA is already doing in the context of its strategic plan. Wide consultation with all stakeholders is important. This is where serving the public interest comes in again. The public interest is not a fixed set of rules written in stone. It depends on the circumstances and can be adjusted as new challenges arise. Certainly after the financial crisis, we need to reflect anew on public interest requirements, in particular their international aspect, which is critical for any global standard-setting body.
There will be times when we must follow the directional signs implied by the examples of more advanced jurisdictions, which have after all experienced the crisis deeply, and seek adjustments that will bring the Code to compatible modes with the implied trends. And, of course, we also need to be sensitive to the challenges that arise in parts of the world where regulations are not as advanced.
But the real question is whether we can set principles and requirements that disturb the status quo in areas where ethical practice needs to be elevated. And, those are the areas to which we will direct our efforts and attention in order to remain effective and relevant.
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